Foreign equity funds strong in 2012

Equity funds in Canada ended 2012 with mostly positive returns, with strong performances from funds that target European and Asian markets in particular.

Canadian equity funds were also in positive territory for the year but lagged their foreign counterparts, according to preliminary performance numbers released today by Morningstar Canada.

Read: Canadians wary of foreign investments The Morningstar Canada Fund Indices that measure the aggregate returns of funds in the European Equity, Asia ex-Japan Equity, Greater China Equity, and Asia Pacific Equity categories were among the best performers with increases of 18.3%, 16%, 15.5%, and 15%, respectively, in 2012. Also posting double-digit increases for the year were the International Equity, Emerging Markets Equity, Global Equity, and U.S. Equity fund indices.

The five domestic equity fund indices posted increases ranging from 5% for the Morningstar Canadian Small/Mid Cap Equity Fund Index to 8.1% for the Morningstar Canadian Dividend and Income Equity Fund Index. While these numbers were respectable on an absolute basis, they were among the weakest relative to other sector-diversified fund indices in 2012.

Read: Strong home bias a disadvantage? The Canadian equity market exhibited a stark contrast between a red-hot financial services sector and poorly performing energy and materials sectors; together these three industry groups account for nearly 80% of the S&P/TSX Composite Index. The financials sector in Canada increased by 17.1% in 2012, while energy and materials were down 4.8% and 5.7%, respectively, as measured by the S&P/TSX sub-indices.

Sector-specific fund indices were prominent among both the best and worst performers for the year. First overall was the Morningstar Health Care Equity Fund Index with a 20.6% increase, while Real Estate Equity and Financial Services Equity also fared well with increases of 17% and 15.2%, respectively.

Read: Emerging markets: Where are they now? As was the case in 2011, the worst performer among all Morningstar Canada Fund Indices in 2012 was the one that tracks the Precious Metals Equity category, which declined 14.5%. The only other fund index in the red for the year was Natural Resources Equity, which decreased by 10.6%.

For the month of December, the top-performing fund index was Japanese Equity, whose 6.1% one-month increase allowed it to climb out of negative territory and finish the year with a 4.1% increase.

Read: Equity funds dragged down by resources

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.